‘Sin taxes’ have potential
ADISCUSSION that may see the Government introducing taxes on potentially harmful products, among them cigarettes and alcoholic beverages, is ongoing. Amid the prevailing economic challenges, Government spending on health, like many other obligations, has declined sharply. From time to time, hospitals run out of important drugs as happened at Ingutsheni Psychiatric Hospital recently, as well as Mpilo and Harare hospitals. Medical equipment at most public health institutions is old and frequently breaks down. Food supplies are erratic as well.
Donors are helping in a big way, but one of the lessons we learn from the difficulties we are facing as a country is that as long as the national budget is insufficient to finance our health sector, and others, we will always have gaps.
Speaking at an annual general meeting of the Community Working Group on Health (CWGH) in Harare recently, an official in the Ministry of Health and Child Care, Mr Gwati Gwati, highlighted a number of funding proposals that the Government was considering to improve the situation.
A once-off five percent addition to the fuel levy and introduction of a value added tax (VAT) for health were options that could be pursued. He mentioned the so-called “sin taxes” as well, levies that a Government can impose on potentially dangerous products such as cigarettes and alcohol to discourage their consumption while raising the much needed money to finance health activities. A policy brief drafted in May last year said the “sin taxes” can generate up to $20 million by 2022. The proposed tax on the existing fuel levy can raise $14 million yearly, said Mr Gwati whereas the VAT for health can raise between $100 and $200 million over the same period.
We are careful not to support additional general taxes on the people since we are substantially taxed already. We have some of the highest fuel prices in Sadc thus an additional tax on it as highlighted by Mr Gwati will make the commodity and the cost of transportation more expensive. This will obviously cause an adverse impact on the wider economy given the centrality of fuel in the running of the economy. At the same time, a VAT for health would be another general burden.
Therefore, “sin taxes” on tobacco and alcoholic products would be a better option. These will impact on a smaller segment of the population, whose consumption of alcohol and tobacco products ironically often results in an additional strain on the poorly funded health services sector when they fall sick. Tobacco smokers frequently suffer from lung cancer and when one suffers from the disease, he or she will require expensive treatment. Excessive consumption of alcohol has many social and economic impacts that the economy has to bear from time to time. So “sin taxes” will help in raising resources to not only take care of those who consume the hazardous products but also raise resources to fund other programmes and activities that enhance the health of the nation. They also discourage consumption when the prices of harmful products are increased given an additional levy.
Indeed, “sin taxes” are conventionally levied on alcohol and tobacco products, but we have seen some countries imposing newer options which our government can consider.
Among them are sugar and soda taxes designed to fight obesity. They can be levied on casino spending as well. Even spending on video games too. Two years ago Mexico imposed a “sin tax” on sodas and junk food, around the same time when Britain was considering a sugar tax.
Sugars are some of the biggest causes of obesity the world over and health experts discourage people from consuming too much of them. Spending in casinos is also discouraged given the adverse social implications associated with too much gambling, among them addiction, family breakdowns and poverty.
Therefore, sugars and casino spending are deemed harmful just like spending on tobacco and alcohol. The proposed taxes on these products would be an effort to discourage spending on them and their consumption while also helping the economy to profit from revenue derived from those who still decide to buy and consume them.
Yes, obesity is not such a big health problem in Zimbabwe yet like gambling but with standards of living expected to improve and consumption of fatty and sugary foods there is a possibility it will be in the next few years.
As we have said, we support imposition of “sin taxes” as they tend to promote a healthier population which is also socially stable and responsible. If the Government sees potential in them it would be good this fundraising option is pursued before other taxes are levied, for example on fuel.
They can help the Government meet the Abuja Declaration threshold under which African countries pledged in 2001 to allocate at least 15 percent of their national budgets on health programmes. They can also go a long way in enhancing the per capita funding to the recommended $86 per person.
“The proposal to introduce earmarked sin taxes to fund health needs to be followed through,” said CWGH executive director, Mr Itai Rusike.